Freshii plunges 35 per cent as growth plans hit wall

RESTAURANT CHAIN

HOLLIE SHAW TORONTO • failure to meet its store opening projections spooked investors on Tuesday, who reacted to the Toronto restaurant chain’s slower than anticipated growth by pushing down its shares as much as 40 per cent.

It’s a common occurrence with fast-growing restaurant chains, according to industry experts, but it rarely sits well with investors who are skittish about slowing growth in the quick-service restaurant sector.

“I think Freshii has promised a bit more than they can deliver,” Doug Fisher, president of food service consulting firm FHG International. “The industry is competitive, more so today than in the past, and everyone is shifting toward healthier more nutritious food. Freshii is the market leader in its category, but there is competition that these guys as operators have not had to experience before.”

Budding chains with solid sales and growth prospects often over-project store opening targets, he added. “International multi-unit franchisees typically have to open a certain number of stores in a certain period of time and they often don’t get sufficient startup time,” Fisher said. It’s not good, but you often see that overreach with smaller, high-growth companies like this.”

Late Monday, Freshii said chief executive of Freshii, said on a recorded call accompanying the announcement late Monday, calling the situation “extremely disappointing.”

Freshii also said the U.K. and U.S. expansions were going slower than expected because its multi-unit franchisees were more conservative about real estate than the company had anticipated.

For fiscal 2019, the company